[Federal Register Volume 82, Number 131 (Tuesday, July 11, 2017)]
[Notices]
[Pages 32024-32026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14428]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81077; File No. SR-NYSEArca-2017-55]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List 
and Trade Shares of the GraniteShares Gold Trust Under NYSE Arca 
Equities Rule 8.201

July 5, 2017.

I. Introduction

    On March 8, 2017, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the GraniteShares Gold Trust 
(``Trust'') under NYSE Arca Equities Rule 8.201. The proposed rule 
change was published for comment in the Federal Register on May 25, 
2017.\3\ On June 21, 2017, the Exchange filed Amendment No. 1 to the 
proposed rule change.\4\ The Commission has not received any comments 
on the proposed rule change. This order approves the proposed rule 
change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80730 (May 19, 
2017), 82 FR 24180 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (1) Clarified the process 
for Authorized Participants to surrender Baskets of Shares; and (2) 
provided additional information regarding which futures exchanges 
are members of the Intermarket Surveillance Group (``ISG'').'' 
Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2017-55/nysearca201755-1818378-154146.pdf. Amendment No. 1 
is not subject to notice and comment because it is a technical 
amendment that does not materially alter the substance of the 
proposed rule change or raise any novel regulatory issues.
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II. The Description of the Proposed Rule Change, as Modified by 
Amendment No. 1 \5\
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    \5\ A more detailed description of the Trust and the Shares, as 
well as investment risks, creation and redemption procedures, NAV 
calculation, availability of information and fees, among other 
things, is included in the Registration Statement, infra note 6.
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    The Exchange proposes to list and trade shares (``Shares'') of the 
GraniteShares Gold Trust (``Trust'') under NYSE Arca Equities Rule 
8.201.\6\ NYSE Arca Equities Rule 8.201 governs the listing and 
trading, or trading pursuant to unlisted trading privileges of 
Commodity-Based Trust Shares on the Exchange.\7\
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    \6\ On January 3, 2017, the Trust submitted to the Commission 
its draft registration statement on Form S-1 (``Registration 
Statement'') under the Securities Act of 1933 (15 U.S.C. 77a).
    \7\ A ``Commodity-Based Trust Share'' is a security (a) that is 
issued by a trust that holds a specified commodity deposited with 
the trust; (b) that is issued by such trust in a specified aggregate 
minimum number in return for a deposit of a quantity of the 
underlying commodity; and (c) that, when aggregated in the same 
specified minimum number, may be redeemed at a holder's request by 
such trust which will deliver to the redeeming holder the quantity 
of the underlying commodity. See NYSE Arca Equities Rule 
8.201(c)(1).
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    The investment objective of the Trust will be for the Shares to 
reflect the performance of the price of gold, less the expenses and 
liabilities of the Trust. The Trust will issue Shares which represent 
units of fractional undivided beneficial interest in and ownership of 
the Trust.
    The Sponsor of the Trust is GraniteShares LLC, a Delaware limited 
liability company. The Bank of New York Mellon is the trustee of the 
Trust (``Trustee'') \8\ and ICBC Standard Bank

[[Page 32025]]

PLC is the custodian of the Trust (``Custodian'').\9\
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    \8\ The Trustee is responsible for the day-to-day administration 
of the Trust. The responsibilities of the Trustee include (1) 
processing orders for the creation and redemption of Baskets; (2) 
coordinating with the Custodian the receipt and delivery of gold 
transferred to, or by, the Trust in connection with each issuance 
and redemption of Baskets; (3) calculating the net asset value of 
the Trust on each business day; and (4) selling the Trust's gold as 
needed to cover the Trust's expenses.
    \9\ The Custodian is responsible for safekeeping the gold owned 
by the Trust, and will facilitate the transfer of gold in and out of 
the Trust (i) through the unallocated gold accounts it may maintain 
for each authorized participant or unallocated gold accounts that 
may be maintained for an authorized participant by another gold 
clearing bank, and (ii) through the unallocated gold accounts it 
will maintain for the Trust. The Trust will take delivery of 
physical gold that complies with the London Bullion Markets 
Association (``LBMA'') gold delivery rules.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposed rule change to list and trade the Shares is consistent with 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\10\ In particular, the Commission finds 
that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\11\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. The last-sale price for 
the Shares will be disseminated over the Consolidated Tape. According 
to the Exchange, there is a considerable amount of information about 
gold and gold markets available on public Web sites and through 
professional and subscription services. Investors may obtain gold 
pricing information on a 24-hour basis based on the spot price for an 
ounce of gold from various financial information service providers.\12\
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    \10\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \12\ The Exchange states that Reuters and Bloomberg, for 
example, provide at no charge on their Web sites delayed information 
regarding the spot price of gold and last sale prices of gold 
futures, as well as information about news and developments in the 
gold market. Reuters and Bloomberg also offer a professional service 
to subscribers for a fee that provides information on gold prices 
directly from market participants. Complete real-time data for gold 
futures and options prices traded on the COMEX are available by 
subscription from Reuters and Bloomberg. There are a variety of 
other public Web sites providing information on gold, ranging from 
those specializing in precious metals to sites maintained by major 
newspapers. In addition, the LBMA Gold Price is publicly available 
at no charge at www.lbma.org.uk. See Notice, supra note 3, 82 FR at 
24182-3.
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    Additionally, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Exchange Act,\13\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest. The 
Commission notes that the Exchange has surveillance-sharing agreements 
with significant, regulated markets for trading futures on gold. 
Specifically, according to the Exchange, (1) the most significant gold 
futures exchange in the U.S. is COMEX, a subsidiary of New York 
Mercantile Exchange, Inc., and a subsidiary of the Chicago Mercantile 
Exchange Group (``CME Group''), and ICE Futures US (``ICE'') also lists 
gold futures; \14\ and (2) the CME Group and ICE are members of the 
ISG,\15\ which will allow NYSE Arca to obtain surveillance information 
from COMEX and ICE. Both COMEX and ICE are regulated by the U.S. 
Commodity Futures Trading Commission (``CFTC'').\16\
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    \13\ 15 U.S.C. 78f(b)(5).
    \14\ See Notice, supra note 3, 82 FR at 24181.
    \15\ See Amendment No. 1, supra note 4.
    \16\ See https://www.theice.com/futures-us/regulation (``ICE 
Futures U.S. is a Designated Contract Market pursuant to the 
Commodity Exchange Act and regulated by the CFTC.''); Securities 
Exchange Act Release No. 68440 (December 14, 2012), 78 FR 75468, 
75469 (December 20, 2012) (SR-NYSEArca-2012-28) (COMEX is regulated 
by the CFTC).
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    The Commission believes that the proposed rule change is reasonably 
designed to promote fair disclosure of information that may be 
necessary to price the Shares appropriately. NYSE Arca Equities Rule 
8.201(e)(2)(v) requires that an intraday indicative value (``IIV,'' 
which is referred to in the rule as the ``Indicative Trust Value'') be 
calculated and disseminated at least every 15 seconds. The IIV will be 
calculated based on the amount of gold held by the Trust and a price of 
gold derived from updated bids and offers indicative of the spot price 
of gold. The Exchange states that the IIV relating to the Shares will 
be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session.\17\ The NAV of 
the Trust will be published by the Sponsor on each day that the NYSE 
Arca is open for regular trading and will be posted on the Trust's Web 
site.\18\ The Trust also will publish the following information on 
their Web site: (1) The mid-point of the bid-ask price as of the close 
of trading (``Bid/Ask Price''), and a calculation of the premium or 
discount of such price against such NAV; (2) data in chart format 
displaying the frequency distribution of discounts and premiums of the 
Bid/Ask Price against the NAV, within appropriate ranges, for each of 
the four previous calendar quarters; (3) the Trust's prospectus, as 
well as the two most recent reports to stockholders; and (4) the last-
sale price of the Shares as traded in the U.S. market.\19\ In addition, 
information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
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    \17\ See Notice, supra note 3, 82 FR at 24182-3.
    \18\ See id. at 24184.
    \19\ See id. at 24183.
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    The Commission also believes that the proposal is reasonably 
designed to prevent trading when a reasonable degree of transparency 
cannot be assured. With respect to trading halts, the Exchange may 
consider all relevant factors in exercising its discretion to halt or 
suspend trading in the Shares. Trading on the Exchange in the Shares 
may be halted because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which conditions in the underlying gold 
market have caused disruptions and/or lack of trading, or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule.\20\ The Exchange will halt trading in the Shares if the 
NAV of the Trust is not calculated or disseminated daily.\21\ The 
Exchange may halt trading during the day in which an interruption 
occurs to the dissemination of the IIV; if the interruption to the 
dissemination of the IIV persists past the trading day in which it 
occurs, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption.\22\
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    \20\ See id.
    \21\ See id.
    \22\ See id.
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    Additionally, the Commission notes that market makers in the Shares 
would be subject to the requirements of NYSE

[[Page 32026]]

Arca Equities Rule 8.201(g), which allow the Exchange to ensure that 
they do not use their positions to violate the requirements of Exchange 
rules or applicable federal securities laws.\23\
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    \23\ Commentary .04 of NYSE Arca Equities Rule 6.3 requires that 
an ETP Holder acting as a registered market maker in the Shares, and 
its affiliates, establish, maintain and enforce written policies and 
procedures reasonably designed to prevent the misuse of any material 
nonpublic information with respect to such products, any components 
of the related products, any physical asset or commodity underlying 
the product, applicable currencies, underlying indexes, related 
futures or options on futures, and any related derivative 
instruments.
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    In support of this proposal, the Exchange has made the following 
additional representations:
    (1) The Shares will be listed and traded on the Exchange pursuant 
to the initial and continued listing criteria in NYSE Arca Equities 
Rule 8.201.\24\
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    \24\ See id.
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    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.\25\
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    \25\ See id.
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    (3) The Exchange deems the Shares to be equity securities.\26\
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    \26\ See id. The Commission notes that, as a result, trading of 
the Shares will be subject to the Exchange's existing rules 
governing the trading of equity securities.
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    (4) The Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.\27\
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    \27\ See id. at 24184.
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    (5) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, and that these procedures are adequate to 
properly monitor Exchange trading of the Shares in all trading sessions 
and to deter and detect violations of Exchange rules and federal 
securities laws applicable to trading on the Exchange.\28\
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    \28\ See id. at 24183. FINRA conducts cross-market surveillances 
on behalf of the Exchange pursuant to a regulatory services 
agreement. The Exchange is responsible for FINRA's performance under 
this regulatory services agreement. See id. at 24183, n.28.
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    (6) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\29\
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    \29\ See id. at 24183-84.
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    (7) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (1) 
The procedures for purchases and redemptions of Shares in Baskets 
(including noting that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; (3) how information regarding the 
IIV is disseminated; (4) ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; (5) the possibility that trading spreads 
and the resulting premium or discount on the Shares may widen as a 
result of reduced liquidity of gold trading during the Core and Late 
Trading Sessions after the close of the major world gold markets; and 
(6) trading information.\30\
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    \30\ See id. at 24184.
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    (8) All statements and representations made in this filing 
regarding (a) the description of the portfolio, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange listing rules specified in this rule filing shall constitute 
continued listing requirements for listing the Shares of the Trust on 
the Exchange.\31\
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    \31\ See id. at 24184.
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    (9) The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Trust to comply with the continued 
listing requirements and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Trust is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under the NYSE Arca Equities Rule 5.5(m).\32\
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    \32\ See id.
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    This approval order is based on all of the Exchange's 
representations--including those set forth above, in the Notice, and in 
Amendment No. 1--and the Exchange's description of the Trust.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act \33\ and the rules and regulations thereunder 
applicable to a national securities exchange.
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    \33\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\34\ that the proposed rule change (SR-NYSEArca-2017-55), 
as modified by Amendment No. 1 be, and it hereby is, approved.
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    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-14428 Filed 7-10-17; 8:45 am]
BILLING CODE 8011-01-P